If he can argue the non-commercial usage, why is there a problem? Why is he being sued in the first place? If I did some kind of derivative work, I'd be afraid of being able to hide behind fair-use. The way things are going, I'm not sure there is much that falls in that category. I wish the government or supreme court, or somebody, could just make a detailed description of what does and does not constitute fair use. I recall years ago there being a lot of controversy about hyperlinking into some websites, but the web was designed to use hyperlinks; I don't think the existing laws work very well for the web.
Shouldn't someone (say, those that commissioned the project and/or used the Hope poster) have checked to see where the original photo came from? I mean, it seems pretty obvious to have come from a photo. Although, I don't understand the distinction of which original source photos he used -- whether it was a crop from one or basically the full frame, it seems the same difference to me. It's a question of whether or not you can take someone else's work and modify it.
This used to be an issue in music; when sampling first took over, people pretty blatantly ripped off samples. One musician said that he takes tiny snippets of sounds from other songs, that the original artist might not even recognize. He said it was like using part of your photo where he only used your big toe. Technically, I don' think you can even pull small bits and use them.
So, having said all of that, if I wanted to make some Obama artwork, I'd expect to have to pay for a stock photo or take my own photo.
As for prior art, that's a good argument against specific patents. I don't know how that applies to copyright in general. (And often, prior-art doesn't seem to stop many things, particularly involving software, from being patented.)